The global oil market is set to tighten in the medium to longer term, recovering from short-term weakness, executives from oil majors and trading houses said on Tuesday.
Rising output from OPEC+ – which groups the Organisation of Petroleum Exporting Countries and allies – as well as from other producers, together with expectations that trade tensions will lead to reduced demand have weakened oil prices this year.
Brent futures traded around $62 a barrel on Tuesday – down by over $15 from a year ago – after the International Energy Agency forecast a 4-million-barrel-per-day surplus (bpd) for 2026.
Declining production rates – which could accelerate as prices fall – will rebalance the oil market in the medium term, as demand draws support from growing consumption in emerging economies, executives said.
SHORT-TERM WEAKER, UPSIDE RISKS REMAIN
Executives from Vitol, Trafigura, and Gunvor all see oil prices weakening before recovering in the next year, pegging prices in a range of $62-66.50 per barrel in one year’s time.
“Prices are slowly coming down, and will come down a little bit more,” Gunvor CEO Torbjorn Tornqvist said at the Energy Intelligence forum in London, citing rising OPEC production, spare capacity for Saudi Arabia and the United Arab Emirates, and renewed exports from Iraqi Kurdistan.
“I suspect we’ll go into the $50s at some point, across Christmas into the new year,” Trafigura’s head of oil Ben Luckock said, cautioning that it would be “a mug’s game”, meaning foolish, to bet on lower prices below $50.
Vitol CEO Russell Hardy said the market was focussing on rising supplies in the second half of this year, but added that low inventories in the West, strong refined products demand, and geopolitical risks, have kept markets backwardated amid falling prices.
Backwardation, where prompt contracts trade above later ones, is a sign of a tight market.
Vitol’s Hardy also cautioned that the market was “probably overly discounting” the potential for supply disruptions next year, highlighting Iran, Russia or Venezuela.
MEDIUM TERM TIGHTNESS
“We are quite bullish on the medium term,” TotalEnergies CEO Patrick Pouyanne said, citing production declines and no peak in global oil demand.
On Monday, ExxonMobil CEO Darren Woods warned that decline rates could hit 15% per year without investment in unconventional oil and gas fields.
“We see resilient demand, and the pressing need for long-term investments in supply,” Saudi Aramco CEO Amin Nasser added on Monday.
ConocoPhillips CEO Ryan Lance said that prices could recover to $70-75 a barrel.
(Reporting by Robert Harvey, Shadia Nasralla, Stephanie Kelly in London, Editing by Kim Coghill and Emelia Sithole-Matarise)